UPDATED 21-Oct: a newspaper columnist who opposes means-testing of the proposed Old Age Living Allowance recently claimed that it is an "open secret" that most of the elderly who qualify for fruit money don't claim it. We put that urban myth to rest with detailed estimates showing at least a 90% claims ratio.

The welfare claims ratio17 October 2012

(updated 21-Oct-2012)

Do HK people claim their entitlements? Writing about the proposed Old Age Living
Allowance in SCMP last Friday, 12-Oct-2012,
Albert Cheng King-hon (aka Jing-han),
who opposes means-testing, said:

"The additional financial burden, if means testing is waived,
is over-exaggerated by the government, because it's an open secret that most of
the elderly who qualify for the "fruit money" do not claim it."

That statement, which formed the core of his argument, is false. The actual
claims ratio for elderly welfare is over 90%, as we will show below. The only
"open secret" here is that Mr Cheng does not check his facts before mouthing off.
HK's elderly are not as irrational as he thinks. He's probably not the first
person to make this claim though, so let's set this urban myth to rest.

Now, keep in mind that there are three mutually-exclusive benefits that a
person aged 70+ could receive, in ascending order of value: either Old Age
Allowance, also known as "fruit money" (OAA), or Disability
Allowance (DA), or the means-tested Comprehensive Social
Security Assistance (CSSA). You cannot have more than one of
these. You need to satisfy disability tests for DA (there are two levels), and a
financial means-test for CSSA, but the fruit money is not means-tested over 70.

The eligible over-70 population

Thanks to the 5-yearly
Census which took place in 2011, we have some accurate data to work with
(they have a neat
roll-your-own tables feature, by the way - geek heaven). The most recent
date for which consistent OAA and DA figures are available is 31-Mar-2011, so
we'll work with that, because the propensity to claim won't have changed much
since then. The Census was conducted as at 3 a.m. on 30-Jun-2011 (Census
Moment), but we can roll back 3 months based on known growth rates.

For statistical purposes, the resident population of HK is divided into
Usual Residents and Mobile Residents. Usual
Residents comprise:

Permanent Residents (PRs, with right of abode) who had
stayed in HK for at least half of the 6 months before or after the Census
Moment; and

Non-permanent residents (ID card holders, including Foreign Domestic
Helpers) who were in HK at the Census Moment.

"Mobile Residents" are defined as:

PRs who were not Usual Residents but were in HK for at least 1 month but
less than 3 months during the 6 months before or after the Census Moment,
regardless of whether they were here at the Census Moment (in fact, the
Census questionnaire asked people about their expectation for the second
half of the year). This means that they spent at least 6 months of the
census year outside HK. At the 2011 Census Moment, there were 212,235 Mobile
Residents, of whom only 40,359 (19.0%) were in HK.

The Census also provides data on population excluding Foreign Domestic
helpers (FDHs). You wouldn't expect many FDHs over 70, but
there were actually 38 in the Census, of whom 7 were aged 75 and 1 was aged 82!
At the Census Moment, there were 706,974 over-70 non-FDH residents,
of whom 20,689 were Mobile Residents. For example, these Mobile Residents
include PRs (including non-Chinese) who have retired overseas but stay with
children in HK for a total of at least 1 month in either half of the year.

The OAA, DA and CSSA rules impose
two requirements which mean that only part of the 70+ population is
eligible, even for OAA. They must be:

resident in HK for at least seven years (unless qualified before
1-Jan-2004, when this requirement was introduced); and

in the case of OAA and DA, resident in HK continuously for the 1 year
immediately prior to application, with total absences of not more than 56 days

So Mobile Residents don't qualify unless they stayed in HK for at least 1
year (less 56 days) some time after reaching 69, or met the criterion after
reaching 65 and passed the means test between 65-69. We will therefore assume
that 80% of Mobile Residents over 70 have not qualified for benefits under
current rules.

The Census also gives the number of years of residence in HK, in
ranges. Of the resident population of 706,974 over-70s at the Census Moment,
3,914 had lived in HK less than 7 years in their life. A few of them may have
been PRs by birth but are now included in Mobile Residents, and a few of them
may have qualified by being resident and over 70 before 2004 (and hence over
77.5 at the Census Moment) but we estimate that 90% of them are not qualified
for OAA.

Finally, the growth rate in the over-70s is currently about 1% p.a., or 0.25%
in 3 months. So our best estimate of the population of eligible over-70s at our
measurement date of 31-Mar-2011 is as follows:

Rounding, we can say about 685,200 people were eligible to
claim. This number will also include a number of Usual Residents who still don't
meet the 1-year (less 56 days) residency requirement, and some people whose
applications for OAA are pending.

Number of OAA recipients over 70

According to
figures from the Social Welfare Department, at 31-Mar-2011 there were
437,002 people on "Higher" OAA (i.e. over 70). In fact the
payments of "Normal" OAA (for aged 65-69) and "Higher" OAA (for 70+), which
historically were different, are now the same $1090 per month, but the Higher
OAA is not means tested.

Number of DA recipients over 70

According to a
Legco answer, at 31-Mar-2011 there were 49,775 people
aged 70+ on DA.

Number of CSSA recipients over 70

In the 2011 Census, of people over 60, 52.4% were over 70. According to a
Government
statistical report in Sep-2012, the number of CSSA recipients over 60 has
been relatively stable since 2004, and declining as a share of the elderly
population from 17.4% at the end of 2004 to 13.5% at the end of 2011. It was
188,283 at 31-Dec-2010 and 187,099 at 31-Dec-2011. Interpolating, we get 187,991
on 31-Mar-2011.

We cannot find separate data for those CSSA recipients who were over 70. So
apportioning the over-60 figures according to the age of the population and rounding to 100,
about 98,500 people over 70 were on CSSA at 31-Mar-2011. The
figure is probably higher, because older retirees are more likely to run out of
money and apply for CSSA than people aged 60-69 who are either still working or
recently retired, and because people over 70 had lower lifetime earnings on
average than those aged 60-69, due to the rising post-war economy. We
call on the Social Welfare Department to publish better data for CSSA recipients
by age, grouped in 5-year age bands.

Final calculation

Altogether then, OAA+DA+CSSA = 618,612 recipients at 31-Mar-2011.
That is about 90.3% of eligible persons. Of the remaining
population,
some of them still would still not qualify for OAA because:

although they are Usual Residents (having spent over 3 months in HK in
either half of 2011), they have not spent a whole year in HK with less than
56 days away since turning 70 - for example, people who spend a lot of time
at an overseas holiday home or visit their overseas children; or

they are in jail or detention

There would also be some residents who recently turned 70 and were in the
process of applying (approval is not instant), or will do so at some point in
future.

So the total claims ratio is at least 90.3% and probably higher. A 2006
Government paper for the Commission on Poverty put the figure at 91% at the
end of 2005. That was before the 42% increase in OAA from $705to $1000 per month
on 1-Feb-2009, which surely made it more attractive.

Fewer than 9.7% of eligible persons over 70 do not claim a benefit. Now, that is just with a benefit of $1,090 per month on the
table. If it is doubled to the proposed OALA of $2,200 ($26,400 per year), or
more, then the claims rate will surely be higher - but whether it is 90%, 95% or
98% really doesn't make a difference to the fundamental point in our article "Help
the needy, not the needless" last week. Non-means-tested handouts are
financially unsustainable.